Related

NEW DELHI: In a widely expected move, the US Federal Reserve left the target range for its benchmark policy rate unchanged at 1.75-2 per cent on Wednesday night, while signalling that the central bank was on track to increase borrowing costs at its next policy meet in September.

The Fed cited strong pace of economic growth, strengthening job market and inflation near its 2 per cent target as reasons for its decision.

“Job gains have been strong, on an average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly,” the central bank said in its policy statement.

The Fed agenda has two more rate hikes by the end of the year. Analysts had all but ruled out a move at this week’s meeting.

Fed Chairman Jerome Powell recently said the economy was in a ‘really good place’ and pledged to continue with gradual increases in borrowing costs in order to maintain the second-longest US economic expansion on record.

Market reactionUS stocks and bonds were little changed after the announcement, with the S&P 500 index slipped about 0.2 per cent and the 10-year treasury yield stood at 2.99 per cent. The dollar added some strength against a basket of key currencies.

September meetFederal funds futures implied traders are pricing in about a 91 per cent chance of a rate rise in September and a 71 per cent chance of an additional hike in December, Reuters reported quoting CME Group's FedWatch program.

Defying TrumpUS President Donald Trump recently criticised policymakers for raising rates. In a move, which analysts may perceive as act of defiance, the Fed policymakers signalled that they were still on track to raise rates for two more times this year. President Donald Trump lashed out at the Fed last month, saying he wasn’t “thrilled” it was raising rates. The comments threw a political cloud over the central bank’s decisions, Bloomberg reported.

From ‘Solid’ to ‘Strong’The Fed committee upgraded its view on the US economy in August statement, as it said that the “economic activity has been rising at a strong rate”. The Fed in its June policy statement had characterised the US economic growth as ‘solid’.

“Information received since the Federal Open Market Committee met in June indicates that the labour market has continued to strengthen and that economic activity has been rising at a strong rate,” the central bank said in the latest policy statement.

Roughly balancedThe Fed said that risks to the US economic outlook appeared roughly balanced. “The Federal Open Market Committee (FOMC) expects that further gradual increases will be consistent with sustained expansion of economic activity, strong labour market conditions, and inflation near the committee’s symmetric 2 per cent objective over the medium term,” it said.

Unanimous decisionWednesday’s decision was unanimous 8-0. Voting members shifted chairs at this meeting, with John Williams voting for the first time as New York Fed president and FOMC vice chairman, with Kansas City Fed chief Esther George taking his place as an alternate for San Francisco while it seeks a new president, Bloomberg reported.